Lisbon-headquartered shopping centre specialist has unveiled plans to merge its Brazilian business with a larger peer in Brazil, Aliansce Shopping Centers.
Financial details were not disclosed.
According to Sonae, the transaction will create the largest mall operator in Brazil in terms of the number of shopping centres under management (40), becoming the second largest in terms of gross leasable area at 14 million m2.
The controlling block of the combined company will be composed of four main shareholders: Canada Pension Plan Investment Board (CPPIB), Renato Rique, Otto Group and Sonae Sierra SGPS.
'Strengthening investments in quality of services, complementarity of portfolios, innovation capacity and the presence of specialists in the business will generate opportunities and achievements throughout the country,' said José Baeta Tomás (pictured), CEO of Sonae Sierra Brazil.
The current shareholders of Aliansce will own 67.9% of the total capital of the combined firm, while the current shareholders of Sonae will own 32.1%, Aliansce said.
The group will manage a total of 40 shopping centres across the country, 29 of which are owned, with 11 managed for third parties. As the landlord for around 7,000 stores, the business will generate annual revenues of up to 70 million reis (€16 mln), according to Sonae's legal advisers Pinheiro Neto.
The combined company will be called Aliansce Sonae Shopping Centers, and will represent a transfer of all Aliansce rights and obligations to Sonae, as the successor and surviving company.
In a note to clients, Credit Suisse analysts said the transaction should unlock value to Aliansce shareholders, and reinforced their view of their shares as a top industry pick.
Ratings agency Moody's said it had placed Sonae Sierra Brazil's Aa2 national scale, corporate family rating under review for upgrade, in the wake of the annoucement.
'Sonae Sierra would benefit from the merger with increased scale, revenue and earnings diversification, and greater financial flexibility from higher operating cash flows,' Moody's said.
'Additionally, the new company will receive strong sponsorship from the Canadian Pension Plan Investment Board, the Alexander Otto Group and Sonae Sierra SGPS,' Moody's noted.
Subject to shareholder and regulatory approval, the formation of Aliansce Sonae is expected to be completed before the end of 2019.
Pinheiro Neto advised Sonae Sierra on legal matters.